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| Media Rates: A Question of Clout? |
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By virtue of their size, small and mid-sized agencies do not have these issues to contend with. Nevertheless, it is not only possible for these firms to get low rates even though they are small, it’s possible for them to get low rates because they are small.
The seller knows that if he or she a gives a great rate to a buyer at a small-sized agency, the buyer will not insist on getting a similar low rate for other high-budget clients. Secondly, chances are the deal is for a small percentage of inventory, which won’t influence the overall profit picture of the seller’s company.
Smaller shops may have other elements working in their favor. Quite often entrepreneurial agencies have blue-chip entrepreneurial clients who encourage then to create tasteful , breakthrough creative.
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Despite a lack of
“clout,” smaller agencies can
use their size as an advantage in getting low media rates.
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The media community is anxious to work with such advertisers because the account is generally prestigious and will enhance the image of the network or magazine that carries the advertisement. The creative work is usually top-notch.
Therefore, because the media brokers want the client so badly, special opportunities that do not come to larger agencies are often available to the small shop. Secondly, if, as many people suspect, smaller shops have clients with leaner staffs, decision making on the part of agency and client personnel may occur more quickly than in a more bureaucratic environment. The ability to make quick decisions probably helps the negotiating process.
Critics may respond that the negotiator at the smaller shop only believes he is getting a good deal because he doesn’t know any better. This is untrue. There are several industry sources for most television media that indicate how rates for large and small agencies compare. What such comparisons show is that low media prices are not the sole domain of a few buyers at the largest agencies. If negotiated properly, by experienced people, small and mid-sized agencies can be competitive with the giants.
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By Gene
Willhoft |
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It is no secret that
large advertising agencies can negotiate effective media buys, at low rates, for their clients. These firms have dedicated professionals who are in the market on a year-round basis. Large agencies do not, however, have a monopoly on low rates. Compared to the top agencies, small and mid-sized agencies can do an equally fine job in getting good deals for their clients.
Current thinking holds that there is a direct relationship between the size of an agency’s billings and that agency’s ability to purchase media-space or time-at low rates. The basis for this relationship is often described in the word “clout.” The chief tenet of clout is that the higher the billing level, the more influence an agency has in the marketplace. This influence is supposed to drive down prices. Conversely (and this is a tacit, but important point), the smaller the billings, the less clout an agency has. Therefore, the proponents of clout imply, small and mid-sized agencies are almost always charged higher media rates than their larger counterparts.
At the heart of the clout issue is the understanding that through proper negotiating, the total budget that a buyer wields (combined for all accounts in the shop) will intimidate the supplier into providing low rates. These low rates must be extended to all clients in the agency. If they aren’t, the clout “benefit” evaporates because not all clients get an equally good deal. At this point, two flaws in the argument emerge.
First of all, not all accounts can get the same low rate. A television network may be willing to sell $10 million worth of time at a very low CPM (cost per thousand), but it probably couldn’t afford to sell $200 million worth of time at the same
CPM, or at a rate even close to it. Simply put, it wouldn’t be profitable for the network to do so.
Secondly, even if the same low price were offered to all of the agency’s accounts, the media inventory may not be available. This is more likely to occur in upscale sports or news programming on cable and network. Obviously, this point does not refer to print, since a publication can always add as many pages as needed to accommodate
advertisers.
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Gene Willhoft is director of media services at Grace and Rothschild in New York. |
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